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Friday, September 27, 2013

In Q4 2010, I came across a project called SNN Raj Serenity that
caught my attention (http://www.snnbuilders.com/raj_serenity.html).
SNN Builders is not a well known builder
– but Sanjay, one of the owners of the
company was living in my flat complex and he was a decent person. The project
by itself was in a good upcoming location (behind IIM Bangalore) and the club
house and overall design looked good.Further, the property was priced well and there were many investors who
booked flats early. Seeing all this, I had recommended this to friends of mine.

One of my colleagues in the MBA institute (where I teach)
booked a flat for 34 lacs. He also shared this with his friends and two of his friends
booked two flats for 34 lacs each, purely as an investment.

Now the phase 1 of property is ready and residents are
moving in and investors are moving out. The two friends of my colleague sold
their flats for Rs 56 lacs each – their investment of 34 lacs over gave them a profit
of 22 lacs each over 2.5 years –a 22% CAGR return.

Was it difficult to sell the property? Not really. Is SNN Raj a tier 1 builder? Not really.

But then the end
product looks good and the location is good and the price is still fair.

The logic then was that the location is good – IT companies are all around and
this property was a large project – 3000 flats, a five star hotel, a mall, a 2
million sq ft office complex and a convention centre– all within the same compound.
Bangalore did not have anything like it
then.

That time, the flat was costing appx. Rs 50 lacs – he invested Rs 10 lacs from his side and took a loan for the remaining amount from HSBC. His decision was impromptu – he did not come to
Bangalore looking for a flat. But he nevertheless took the call and invested.
Did he have Rs 10 lacs? No – how he managed it is another story :-)

Over the next few years, quite a few things happened globally
that I do not want to dwell upon. There was also a serious accident in the
project site where one of the towers being built just collapsed and that
delayed the project by about 2 years – finally in 2010-11 the project was
completed.

Now it is a great place to live and work and is a well known address
in Whitefield for mid level and senior professionals.

My friend is now looking at selling the property. The flat
will go at an estimated Rs. 140 lacs now. Of this Rs. 140 lacs, he will need to
repay his 40 lac loan. He will be still left with Rs 100 lacs. The pre emi he
has paid over the past 7 years is about 25 lacs.

So his investment of 10 lacs and Rs 25 Lac emi payments over 7
years has given him Rs 100 lacs now - he has tripled his Rs 35 lacs to Rs 100 lacs.

Do you want to do a similar act now? Write to me and I will give you a few similar ideas.